SCENARIO 13-13
An econometrician is interested in evaluating the relationship of demand for building materials to mortgage rates in Los Angeles and San Francisco.He believes that the appropriate model is $$Y = 10 + 5 X _ { 1 } + 8 X _ { 2 }$$
where
$$\begin{array} { l }
X _ { 1 } = \text { mortgage rate in } \% \
X _ { 2 } = 1 \text { if SF, } 0 \text { if LA } \
Y = \text { demand in } \$ 100 \text { per capita }
\end{array}$$
-Referring to SCENARIO 13-13, the fitted model for predicting demand in San Francisco is_.
A)10 + 5X1
B)10 + 13X1
C)15 + 8X2
D)18 + 5X1

Question

SCENARIO 13-13
An econometrician is interested in evaluating the relationship of demand for building materials to mortgage rates in Los Angeles and San Francisco.He believes that the appropriate model is $$Y = 10 + 5 X _ { 1 } + 8 X _ { 2 }$$
where
$$\begin{array} { l } 
X _ { 1 } = \text { mortgage rate in } \% \
X _ { 2 } = 1 \text { if SF, } 0 \text { if LA } \
Y = \text { demand in } \$ 100 \text { per capita }
\end{array}$$
-Referring to SCENARIO 13-13, the fitted model for predicting demand in San Francisco is_.
A)10 + 5X1
B)10 + 13X1
C)15 + 8X2
D)18 + 5X1

Quizplus · Accepted Answer

To predict demand in San Francisco, $X_2$ is set to 1. Substituting $X_2 = 1$ into the model $Y = 10 + 5X_1 + 8X_2$ gives $Y = 10 + 5X_1 + 8(1) = 18 + 5X_1$.

SCENARIO 13-13 an Econometrician Is Interested in Evaluating the Relationship Y=10+5X1+8X2Y = 10 + 5 X _ { 1 } + 8 X _ { 2 }Y=10+5X1​+8X2​

SCENARIO 13-13
an Econometrician Is Interested in Evaluating the Relationship $Y = 10 + 5 X _ { 1 } + 8 X _ { 2 }$